[455
P.3d 312] [257 Cal.Rptr.3d 44] Fourth Appellate District,
Division One, D069751, San Diego County Superior Court,
37-2015-00016536-CU-MC-CTL, Joan Marie Lewis, Judge.
Page 734
[Copyrighted Material Omitted]
Page 735
COUNSEL
Briggs
Law Corporation, Cory J. Briggs, Anthony N. Kim, San Diego;
Higgs Fletcher & Mack, John Morris and Rachel E. Moffitt, San
Diego, for Plaintiff and Appellant.
Mara W.
Elliott, City Attorney, David J. Karlin and George F.
Schaefer, Assistant City Attorneys, and Meghan Ashley
Wharton, Deputy City Attorney, for Defendants and
Respondents.
OPINION
Corrigan,
J.
Page 736
[455
P.3d 313] [257 Cal.Rptr.3d 45] A citizens taxpayer
organization sued to invalidate certain contracts allegedly
made in violation of Government Code section 1090. The
question is whether Government Code section 1092 gives
plaintiff the statutory standing to do so. We hold that
section 1092[1] does not provide plaintiff a private
right of action because it was not a party to the contracts.
The Court of Appeals judgment to the contrary is reversed.
The matter is remanded for further proceedings.
I. BACKGROUND
Under
section 1090, government officials and employees cannot be
financially interested in any contract made by them in their
official capacity or by any body of which they are a member.
The statute codifies the long-standing common law rule
prohibiting public officials from having personal financial
interests in contracts they form in their official
capacities. (Lexin v. Superior Court (2010) 47
Cal.4th 1050, 1072, 103 Cal.Rptr.3d 767, 222 P.3d 214.) Both
the common law and section 1090 "recognize [t]he truism
that a person cannot serve two masters simultaneously.
" (Lexin, at p. 1073, 103 Cal.Rptr.3d 767, 222
P.3d 214, quoting Thomson v. Call (1985) 38 Cal.3d
633, 637, 214 Cal.Rptr. 139, 699 P.2d 316 (Thomson
); see also San Diego v. S.D. & L. A. R. R. Co.
(1872) 44 Cal. 106, 113.) Section 1090 has a broad reach,
prohibiting both
Page 737
direct and indirect financial interests in public contracts.
(See Moody v. Shuffleton (1928) 203 Cal. 100,
103-105, 262 P. 1095.) The penalty for a violation is
substantial: The interested official must disgorge any
profits earned, and may not recover any consideration paid,
under the contract. (Thomson, at pp. 646-652, 214
Cal.Rptr. 139, 699 P.2d 316.)
Section
1092 provides that any contract made in violation of section
1090 "may be avoided at the instance of any party except
the officer interested therein." (§ 1092, subd. (a).)
The dispute here revolves around the meaning of the phrase
"any party." Some background will provide context.
In
2007, the City of San Diego issued bonds to finance the
construction of Petco Park. In 2015, the City sought to
refinance the remaining debt on those bonds. It adopted an
ordinance and its Public Facilities Financing Authority
(PFFA) passed a resolution authorizing the issuance of new
bonds to accomplish the refinancing.[2] Shortly thereafter,
San Diegans for Open Government (plaintiff) sued the City and
PFFA (collectively, defendants), asserting that aspects of
the refinancing transaction violated section 1090 because at
least one member of the financing team, which included both
city employees and private organizations, had a financial
"interest in one or more contracts for the sale of the
2015 Bonds." Plaintiff claimed it was seeking relief
"under Code of Civil Procedure Sections 860 et seq. and
1060 et seq." The complaint asserted a single cause of
action, alleging that the bond issuance violated provisions
of the California Constitution, the Citys charter and
municipal code, and section 1090. Plaintiff sought a judgment
declaring the bond transactions approval unlawful and an
injunction prohibiting defendants from acting to further the
bond issuance.
[257
Cal.Rptr.3d 46] Plaintiff ultimately agreed to entry of
judgment as to all allegations except the section 1090
violation. Defendants then argued that plaintiff lacked
standing as to that issue, citing San Bernardino County
v. Superior Court (2015) 239 Cal.App.4th 679, 190
Cal.Rptr.3d 876 (San Bernardino ). Plaintiff argued
it had standing under section 1092 and Code of Civil
Procedure section 526a.[3] [455 P.3d 314] Plaintiff also
mentioned it had timely filed its action under the validation
statutes. (Code Civ. Proc., § 860 et seq.) The trial court
ruled for
Page 738
defendants, concluding that section 1092 only confers
standing on the parties to a challenged contract,
and that plaintiff also lacked standing under Code of Civil
Procedure section 526a. The remaining action was dismissed.
Plaintiff
appealed. In the Court of Appeal, the parties agreed that
Code of Civil Procedure section 863 did not provide plaintiff
an independent right of action to assert a section 1090
violation.[4] As to whether plaintiff could proceed
under Code of Civil Procedure section 526a, plaintiff argued
that it could, while defendants argued subdivision (b) of
that provision barred plaintiffs claims for
relief.[5]
The
Court of Appeal held that the term "party" in
section 1092 means "any litigant with an interest in the
subject contract sufficient to support standing," and
that plaintiff possessed such an interest. (San Diegans
for Open Government v. Public Facilities Financing Authority
of City of San Diego (2017) 16 Cal.App.5th 1273, 1284
(San Diegans ).) Because it found plaintiff could
pursue its claim under section 1092, it did not decide
whether plaintiff could proceed under Code of Civil Procedure
section 526a. (San Diegans, at p. 1285, fn. 4.)
II. DISCUSSION
A.
General Rules Regarding Standing and Causes of Action
"Unlike the federal Constitution, our state Constitution
has no case or controversy requirement imposing an
independent jurisdictional limitation on our standing
doctrine." (Weatherford, supra, 2 Cal.5th at
pp. 1247-1248, 218 Cal.Rptr.3d 394, 395 P.3d 274.) Typically,
to have standing, a plaintiff must plead an actual
justiciable controversy and have some "special interest
to be served or some particular right to be preserved or
protected over and above the interest held in common with the
public at large." (Carsten v. Psychology Examining
Com. (1980) 27 Cal.3d 793, 796, 166 Cal.Rptr. 844, 614
P.2d 276.) This requirement has been relaxed in some
contexts. For example, California [257 Cal.Rptr.3d 47] courts
have consistently held that taxpayers have standing to
prevent illegal conduct by public officials despite the lack
of a special interest or right distinct from that belonging
to the general public. (See e.g., Weatherford, at p.
1248, 218 Cal.Rptr.3d 394, 395 P.3d 274; Crowe v.
Boyle (1920) 184 Cal. 117, 152, 193 P. 111; Mock v.
City of Santa Rosa (1899) 126 Cal. 330, 345, 58 P. 826.)
Page 739
Though
standing requirements are construed more liberally in
litigation enforcing public rights, a plaintiff suing under a
particular statute still must show that it is among those
with "a statutory right to relief."
(Weatherford, supra, 2 Cal.5th at p. 1248.) Here,
the question is whether plaintiff has a cause of action
creating a right to relief under section 1092. "Whether
a statute gives rise to a private right of action is
a question of legislative intent." (County of San
Diego v. State of California (2008) 164 Cal.App.4th 580,
609, 79 Cal.Rptr.3d 489; see also Boorstein v. CBS
Interactive, Inc. (2013) 222 Cal.App.4th 456, 466, 165
Cal.Rptr.3d 669.) The intent may be express or implied
(Lu v. Hawaii an Gardens Casino, Inc. (2010) 50
Cal.4th 592, 597, 113 Cal.Rptr.3d 498, 236 P.3d 346
(Lu )), but either way "the Legislature must
clearly manifest an intent to create a private cause of
action under [the] statute" [455 P.3d 315] (id.
at p. 601, fn. 6, 113 Cal.Rptr.3d 498, 236 P.3d 346, citing
Moradi-Shalal v. Firemans Fund Ins. Companies
(1988) 46 Cal.3d 287, 295, 250 Cal.Rptr. 116, 758 P.2d 58).
The burden of persuasion is with the party claiming a
statutory right to sue. (Lu, at p. 601, 113
Cal.Rptr.3d 498, 236 P.3d 346.)
B.
Plaintiff Cannot Sue Under Section 1092
Section
1092 provides in relevant part that "[e]very contract
made in violation of any of the provisions of Section 1090
may be avoided at the instance of any party except the
officer interested therein." (§ 1092, subd. (a).)
Defendants argue the phrase "any party" includes
only parties to the challenged contract. Plaintiff argues the
phrase applies more broadly to embrace other interested
persons and organizations like itself.
The
Court of Appeal agreed with plaintiff. It reasoned that the
"important policy embodied in section 1090 ... will not
be vindicated if public officials believe section 1090s
substantive provisions may only be enforced by the very
public officials or public entities who have violated the
statutes provisions." (San Diegans, supra, 16
Cal.App.5th at pp. 1283-1284.) "[A] public officials
duty to avoid even temptation cannot be advanced by
adopting a rule which limits civil enforcement to that public
official or public entities controlled by the official."
(Id. at p. 1284.) The court also found that the
"weight of authority" stood for the proposition
that "standing to assert section 1090 claims goes beyond
the parties to a public contract." (Ibid.)[6]
Page 740
Based on "that authority and the important and strict
policy embodied in section 1090," the court interpreted
"section 1092s reference to any party to include any
litigant with [257 Cal.Rptr.3d 48] an interest in the subject
contract sufficient to support standing." (San Diegans,
at p. 1284.) This would include, according to the court,
parties with interests sufficient to support standing under
Code of Civil Procedure sections 526a and 863. (San Diegans,
at p. 1285.)
We read
the statute differently. "We begin with the text of the
statute as the best indicator of legislative intent."
(Tonya M. v. Superior Court (2007) 42 Cal.4th 836,
844, 69 Cal.Rptr.3d 96, 172 P.3d 402.) The statute refers to
a "contract made in violation" of section 1090,
then provides that any such contract "may be avoided by
any party except the officer interested therein." (§
1092, subd. (a).) The most natural reading of this language
is that the phrase "any party" refers back to the
contract; that is, any party to the contract can sue
to avoid it. The use of the word avoid in section 1092 also
supports this construction. Typically, we speak of a party to
a contract avoiding its legal obligations thereunder. (See
e.g., Rest.2d Contracts, § 7 ["[a] voidable contract is
one where one or more parties have the power ... to avoid the
legal relations created by the contract"].) Indeed, the
Restatement Second of Contracts notes that "[a]voidance
is often referred to as disaffirmance. " (Rest.2d
Contracts, § 7, com. b, p. 20.) A non-party does not possess
the power to affirm or disaffirm a contract. (Ibid .
["[u]sually the power to avoid is confined to one party
to the contract, but [under certain circumstances] the
contract may be voidable by either one of the
parties"].)
This
conclusion finds further support in provisions of the Civil
Code governing the formation and interpretation of contracts.
(See Smith v. Fair Employment & Housing Com. (1996)
12 Cal.4th 1143, 1156, 51 Cal.Rptr.2d 700, 913 P.2d 909');">913 P.2d 909
[reviewing the "Legislatures use of the words marital
status " in the Family and Probate Codes to determine
the meaning of that word in a Government Code provision]; see
also Pesce v. Dept. Alcoholic Bev. Control (1958) 51
Cal.2d 310, 312, 333 P.2d 15; [455 P.3d 316] Picayune
Rancheria of Chukchansi Indians v. Brown (2014) 229
Cal.App.4th 1416, 1428, 178 Cal.Rptr.3d 563.) Civil Code
section 1559, for example, provides that a "contract,
made expressly for the benefit of a third person,
may be enforced by him at any time before the
parties thereto rescind ...